There's a trick to significantly reduce the length of your mortgage and save thousands of dollars in interest: Make extra payments that apply to the loan principal. Borrowers employ various techniques to meet this goal. Paying 1 extra payment one time every year is likely the easiest to arrange. Of course, many people won't be able to swing such a large additional payment, so splitting one extra payment into 12 extra monthly payments works as well. Finally, you can pay a half payment every two weeks. These options differ a little in lowering the total interest paid and shortening payback length, but each will significantly reduce the duration of your mortgage and lower the total interest paid over the life of the loan.
It may not be possible for you to pay down your principal every month or even every year. But you should remember that most mortgages allow additional payments at any time. Whenever you get some extra money, consider using this rule to pay a one-time additional payment toward your principal. Here's an example: five years after buying your home, you get a larger than expected tax refund,a large legacy, or a non-taxable cash gift; , investing a few thousand dollars into your mortgage principal will significantly shorten the repayment duration of your loan and save a huge amount on mortgage interest paid over the duration of the mortgage loan. Unless the mortgage loan is very large, even small amounts applied early in the loan period can yield huge benefits over the duration of the loan.
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